Mileage Rates for 2016

For 2016 the standard mileage rate used to calculate the deductible costs of operating an automobile for business purposes will be lower—dropping by 3.5 cents per mile. The medical and moving expense rates decreased 4 cents per mile from the 2015 rates.

On Dec. 17th, the Internal Revenue Service (IRS) issued its 2016 optional standard mileage rates. Beginning on Jan. 1, 2016, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

54 cents per mile for business miles driven, down from 57.5 cents for 2015;

19 cents per mile driven for medical or moving purposes, down from 23 cents; and

14 cents per mile driven in service of charitable organizations, as set by statute.

In a news release, the IRS said that the standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. Taxpayers will always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Please note; a taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.  Also, the business standard mileage rate cannot be used for more than four vehicles simultaneously. These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business expense are found in Revenue Procedure 2010-51.

For computing the allowance under a FAVR plan, in 2016 the standard automobile cost may not exceed $28,000 for automobiles or $31,000 for trucks and vans.

To get the standard mileage rates or guidance on what a tax payer would need to calculate the rates correctly, please reference IRS Notice 2016-01.